Robinhood Raises a New $3.4B to Support Surging Consumer Demand

The trading unicorn, Robinhood, has raised $3.4 billion to its balance sheet from shareholders. The amount seems to reach this magnificent amount from a 1 billion fund support it announced on Friday. Robinhood seeks to support a flood of retail investors looking to inject their capital in individual stocks on its app. The whole decision was spurred by social media investors boosting the shares in GameStop.

In its release, Robinhood said that they would build and enhance their products to give more access to the financial system through the funding. Micky Malka, the managing partner of Ribbit Capital, also said that the company had served millions of people who have felt neglected by America’s financial system. He expressed confidence that Robinhood would emerge stronger through this phase of growth and unprecedented demand.

Ribbit Capital and existing investors like ICONIQ Capital, Andreessen Horowitz, Sequoia, Index Ventures, and NEA led the round to finalize the terms.

Jason Warnick, CFO, Robinhood, said that this round of funding would take them a long way in scaling to meet the incredible growth they have observed and demand for their platform. Robinhood is humbled by their customers’ response to our offering and remains inspired by everyday people taking control of their financial futures.

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Frozen Purchases

On Thursday, Robinhood abruptly limited trading of stocks like GameStop, AMC Entertainment, BlackBerry amid an evident short squeeze and other highly-leveraged supplies coordinated through online chat rooms frequented by Robinhood traders.

The change sparked a backlash from retail investors who thought they were being punished for their success in routing Wall Street pros who were shorting the stocks.  Politicians also jumped into the fray, portraying Robinhood’s move as an attempt to protect Wall Street Goliaths from populist traders.

On the same day, angry users sent a flood of critical reviews that caused the app’s rating to move from roughly four stars out of five on Wednesday to just one star on Thursday.

Later Google actively removed negative reviews of the Robinhood app from the Google Play Store. A Google spokesperson said that the popular tech has deleted the ratings and defended the move noting that it has rules against coordinated or inorganic review.

Margin Requirements

Robinhood said it was forced to limit the trading and raise capital to meet increases at the Depository Trust & Clearing Corporation (DTCC) clearinghouse driven by the surge in speculative trading through the site. They added that its operations are within the existing regulatory environment.

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The limitation of particular stocks came just a few hours after the Securities and Exchange Commission cautioned that it was “monitoring” the market volatility. Recently Robinhood settled with the SEC for $65 million after misleading customers and failing to satisfy the best execution duty. Its GME trading freeze may have been in reaction to the SEC’s statement.